Weather Forecasting for Weather Derivatives Research Proposal

Weather Forecasting for Weather Derivatives - Research Proposal Example The goal is to determine which method leads to the smallest forecasting error. The forecast is performed only for the one time step ahead and is not required to provide long lasting forecast. Since their inception in 1996, weather derivatives have grown in large quantities. Today, weather derivatives are being used for hedging purposes by companies and industries, whose profits can be adversely affected by unseasonal weather or, for speculative purposes by hedge funds and others interested in capitalizing on those volatile markets. A weather derivative is a financial instrument that has a payoff derived from variables such as temperature, snowfall, humidity and rainfall. However, it is estimated that 98-99% of the weather derivatives now traded are based on temperature. Temperature contracts have as an underlying variable, temperature indices such as Heating Degree Days (HDD) or Cooling Degree Days (CDD) defined on average daily temperatures. The list of traded contracts is extensive and constantly evolving. In the Chicago Mercantile Exchange (CME) there are traded weather contracts based on an index of Cumulative Average Temperature (CAT) for European cities for May to September (Zapranis). Many weather derivatives are traded long before the start of the contract and long before there are any useful forecasts which can indicate the likely weather during the contract period. For instance, contracts for the winter period may be traded in the preceding spring and early summer. In this case, only historical observational data are required for derivative valuation. It is also common for weather derivatives to be priced just before and during the period of the contract. There are two main reasons for this. The ï ¬ rst is that weather derivatives are traded at these times. This can be for economic hedging reasons, or purely for speculation. The second is that companies that have traded a weather derivative often need to track the value of the

What Is Important in the Behaviors of the Managers Research Paper

What Is Important in the Behaviors of the Managers - Research Paper Example All the perspectives management are true with respect to the past writings by those described as managerial pioneers. While others have argued that the management thought began in the early days of the industrial revolution while others have argued that it began well before the industrial revolution. However, for this discussion, the focus would mainly be based on the patterns and the themes in historical management practices and theory that have existed for quite a long time and evolution of management theory. Diamond (2005), explains that the society has to learn from the past and hence restructure, otherwise it faces threats of collapse. The major developments in research and theory have been very important in the development of the organizations and their management over the last century. First, it should be acknowledged that the researchers, as well as the developers of the theory and practice in management, have often treated the organizations as being similar in all perspectiv es. The managers should, therefore, be very much aware of the developments in the management practices in the historical perspective since they give insights for better management and continual improvements in management. This paper, therefore, holds the view that the different theories of management practised in the past have been influenced by the behaviors of the managers and the organizations (Rainey, 2009). The development of one management theory is vital for the development of the other since one's theory is practised, the behaviors of the organizations and how the managers react with respect to effeteness would be crucial for the improvement of a particular theory.